PERSPECTIVE
PROFIT ISN ’ T JUST about revenue generation
Contributed by LAURA RESCO , HOTSTATS
For many years , top-line metrics have been the cornerstone of hotel performance assessment , and RevPAR leadership seemed to be the holy grail of the industry . It is indisputable that revenue generation is a necessary variable for the health of any business , but it is in no way sufficient . Profitability is the end-goal , but contrary to what the top-line-focus narrative proposes , it ’ s not a byproduct of revenue . Revenue growth does not translate automatically into higher profits ; a tight grip on costs is what will help the extra top-line dollars flow through optimally to the bottom line . Profitability doesn ’ t just happen : it is the result of purposeful actions within the context of a business strategy that involves both revenue and cost management .
Every dollar of revenue comes at a cost : labor , utilities , supplies , commissions , fees , maintenance , among many others . And even though this might seem an obvious statement , the answer to the question “ How much does each dollar of revenue cost ?” is anything but trivial . Even more importantly , the follow-up question : “ Should each dollar of revenue cost as much as it does ?”
Understanding the cost structure associated with an operation requires much more than just looking at occupancy , ADR and RevPAR . Just to name a few examples :
• What are the labor costs per occupied room for each functional area in the rooms department ?
• How much does each occupied room cost in terms of cleaning supplies and amenities ?
• How much does a hotel spend on travel agents and OTA commissions as a percentage of rooms revenue ?
• What is the energy cost of the asset on a per-available-room basis ?
• What is the gross operating profit per available room
( GOPPAR )?
• What is the gross operating profit margin ?
• What is the flow-through percentage ? Another key factor to consider is that cost structures are not
66 hotelsmag . com June 2023